The president of China is preparing to move to resolve the clash with Washington on technology and trade with promises to cut import taxes, improve intellectual property protection and increase imports


April 10, 2018

President Xi Jinping prepared the ground on Tuesday for a possible effort to resolve a worsening of the Washington and technology clash and trade promising to cut taxes on car imports, improve intellectual property protection and increase imports.

Xi’s commitments at a business conference came when China presented a World Trade Organization challenge on one aspect of its expanding conflict with President Donald Trump – rising last month’s US steel tariffs and aluminum.

Tensions with the United States complain that China is flooding global markets with unfairly low-priced goods and putting pressure on foreign companies to deliver the technology has become part of the biggest trade conflict since World War II.

Speaking with Chinese and foreign businessmen, Xi did not mention Trump or their dispute. It has promised progress in areas that are US priorities, including the opening of the Chinese banking industry, but has not given any direct response to Trump’s requests, as the final requirements for foreign companies to work through joint ventures that require them to provide technology to potential Chinese competitors.

Analysts in the private sector have seen Xi’s speech as an opening to help resolve the stalemate that has fueled fears that the global economy may come to a halt if other governments raise their barriers to imports .

Trump has threatened to raise tariffs for Chinese assets worth $ 50 billion. Beijing responded with its own $ 50 billion list of US assets for possible retaliation.

In his speech, Xi sought to position China as a defender of free trade, despite its status as a more closed economy, in response to Trump’s “America first” demands for import restrictions and trade agreements more favorable to the United States . The speech was free from the nationalist violence that increasingly distinguishes the official Chinese statements and has repeatedly called for international cooperation.

“China’s opening door will not be closed and it will only open wider,” Xi told the Boao Forum for Asia.

Xi, the country’s most important leader since the 1980s, has said that Beijing will “significantly lower” tariffs on car imports this year and will ease restrictions on foreign ownership in the automotive industry “as soon as possible”.

He also promised to encourage “normal technological exchanges” and “protect the legitimate property rights of foreign companies”.

“President Xi’s speech could create an excellent platform to initiate the U.S.-China dialogue at the WTO to find an agreement on intellectual property rights,” said IHS Markit economist Rajiv Biswas in a report. “This would be a victory for the world trade system and an important step away from the abyss of growing global protectionism”.

The controversy will probably end “with a concession from China,” Larry Hu of Macquarie Group said in a report.

Singapore Prime Minister Lee Hsien Loong, also speaking in Boao, welcomed Xi’s promises.

“We look forward to seeing these strategies worked out, implemented and bearing fruit,” Lee said, according to a transcript released by his office.

Meanwhile, Chinese diplomats have filed a request at the WTO headquarters in Geneva for consultations with Washington on Trump’s increase in prices on steel and aluminum.

If this fails, Beijing can request a ruling from a group of WTO experts. China has also issued a list of $ 3 billion of US assets including pork and apples for possible retaliation.

Chinese officials deny that foreign companies are forced to surrender technology, but groups of companies claim that joint ventures and licensing regulations make it inevitable.

Last month, the United States filed a WTO complaint accusing Beijing of violating its trade commitments by imposing unfair contract terms and allowing companies to use foreign-owned technology after license periods have expired.

Foreign companies complain that Beijing is turning them away from promising parts of the state-dominated economy to promote the Communist Party’s plans to create global Chinese competitors in areas such as robotics, electric cars and pharmaceuticals.

Xi did not provide details on how these conditions could change, leaving no clear whether this might make Washington think.

Simplifying the rules that restrict foreign participation in a 50 percent automotive joint venture could help address Trump’s complaints about technology and offer them greater flexibility in their larger global market.

Jake Parker, vice president for China of the Business Council U.S.-China, an industrial group, welcomed the announcement of Xi, but expressed hope for further measures, such as the conclusion of requirements for joint ventures and technology licenses.

“Ultimately, American industry will seek to implement long-term economic reforms, but actions to date have greatly undermined the optimism of the US business community,” Parker said in an e-mail.

Xi has repeated previous official commitments to open the Chinese financial industries to foreign investors, but did not provide further details.

The biggest beneficiaries of a 25% tariff cut in China on most car imports will be the few car manufacturers such as the Tesla electric car brand that do not have a factory in China. Other automakers such as General Motors and Volkswagen that assemble vehicles in China with local state-owned partners may offer additional models.

More generally, Xi has repeated the official promises to expand imports and to narrow China’s trade surplus, which reached $ 423 billion last year – about two-thirds of that with the United States.

“China does not look for a trade surplus,” Xi said in the comments broadcast on national television. “We have a genuine desire to increase imports and achieve a better balance of international payments”.

Most of Xi’s 40-minute speech was dedicated to China’s vision for economic development and its global role after a ruling party congress in October that installed it for a second five-year term as a leader.

Xi sought to defuse concern over Beijing’s growing military power and territorial disputes with its neighbors, saying its government wants to pursue peaceful and cooperative development.

“We will not bully our neighbors,” the president said. “The thinking of the cold war and the zero-sum games are increasingly obsolete”.

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